A business owner’s greatest worry when trying to sell the company is the prospect of receiving an inadequate price by the acquirer or being undervalued.

One of the drags on the value of a business is customer concentration. For owners planning to sell in the next five to 10 years, exporting is one way to diversify a customer base. “It’s too risky to export,” entrepreneurs often say when they’re asked about taking their brands beyond the Canadian market. “It would be a financial drain and a time suck.”

Inside Jobs

The money used to take a risk on exporting comes directly from their pockets or their credit lines at the bank. How well the effort goes could impact the amount of money available to be taken out of a business for retirement.

About a third of Canada’s GDP comes from exports, and it’s easy to assume big corporations dominate the field thanks to their financial resources and the skills required to stick-handle long-distance markets, but a surprising number of privately owned companies are giving exporting a try.

Anna Janes, owner of Cocomira Confections Inc., which makes a premium confectionary product, has seen a good deal of success with her exporting efforts. “Five years ago we needed growth opportunities, so we looked hard at markets outside of North America because of the rise in the Canadian dollar versus the U.S. dollar. Now our 2013 sales targets for U.S. and international exports are both 10 per cent of sales. In the long term we expect our international sales to outpace our U.S. sales.”

Exporting raised the profile of tiny Quebec company Toon Boom Animation Inc. enough that in 2011, HSBC awarded it an International Business of the Year for Small Enterprise prize. In 2012, the exporter of software for creating animation caught the attention of Corus Entertainment Inc., and it was acquired.

Do you want to increase the valuation of your business? Exporting can build a more diverse client list. Here are a few tips from entrepreneurs who have succeeded over the long term:

Have a compelling and believable business plan

Dipping a toe in the export market can provide a quick readout of its temperature, but a company must define its export strategy before taking the plunge. Make the business case about how big your export market should grow over five years and how it will realistically improve financial performance.

Cocomira carefully defined its market: countries where consumers were happy to pay extra to get a really tasty treat. “We had limited marketing money so we were careful about how we spent it,” owner Anna Janes says. “In the end we identified countries that import almost all their food – and that care greatly about the quality of what they eat.”

Cocomira is now exporting to Singapore, Japan and the United Arab Emirates. “Singapore and the UAE import 90 per cent of what they eat, Japan imports 60 per cent,” Mr. Janes explains. “We plan to sell into other countries in the Middle East in 2014.”

Demonstrate your ability to manage risk

Elena Quistini, owner of Pasta Quistini Inc., exports brightly branded, high-value pastas to Shanghai, where the products are establishing a customer base. “Going through a reputable broker reduced our risk as we could find out about market interest and decide if we wanted to go forward in China,” she says.

Have more than a few clients

Most owners recognize the risk of relying on a few large clients when it comes time to sell the business. They know a buyer will use client concentration to knock down their valuation. Increasing the value of the company means increasing the number of key clients with signed, long-term contracts.

With a number of retailers in Canada consolidating, middle market and smaller companies are discovering they have more exporting clout. A geographically diverse customer base may present more of a challenge, but when selling your business, it may also earn a worthwhile increase in valuation.

Topics

Next story

| Learn More

Discover content from The Globe and Mail that you might otherwise not have come across. Here we’ll provide you with fresh suggestions where we will continue to make even better ones as we get to know you better.

You can let us know if a suggestion is not to your liking by hitting the ‘’ close button to the right of the headline.

Restrictions

All rights reserved. Republication or redistribution of Thomson Reuters content, including by framing or similar means, is prohibited without the prior written consent of Thomson Reuters. Thomson Reuters is not liable for any errors or delays in Thomson Reuters content, or for any actions taken in reliance on such content. ‘Thomson Reuters’ and the Thomson Reuters logo are trademarks of Thomson Reuters and its affiliated companies.